Michael C. PhiriLegal OfficerSecurities & Exchange Commission

Discussion Topics1. Who is the SEC?2. The Role of the SEC3. What are Financial markets and Capital

markets?4. Who is the LuSE?5. What is the LuSE Alternative Market?6. Requirements to list on the LuSE Alt-M7. How can Farmers access funds on the LuSE

ALT-M?8. The Role of the SEC and the LuSE Alt-M

Who is the SEC?The Securities and Exchange Commission is the

regulator of the capital market.

Founded in 1994 under the Securities Act Cap. 354 of Volume 20 of the Laws of Zambia.

The SEC acts more or less like the “police” of the capital market ensuring that the interests of both local and international investors are protected through the execution of the highest standards of good corporate governance by the market players, ie. Brokers, LuSE

Role of the SEC(a) Regulation of Capital MarketsCustodian of the Securities Act-framework for

Securities business in Zambia-Ensuring markets are fair, transparent, efficient

(b) Licensing of Capital Markets PlayersEnsuring only fit and proper persons are

participating on the market- aimed at protecting investors

(c) Registration of SecuritiesShares(equity) Debt instruments(bonds, notes)

Financial and Capital MarketsFinancial markets are a platform where people

and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand

• Financial markets consists of:1.Capital markets - both the primary and

secondary markets (long term securities)2.Money markets - borrowing and lending in the

short term (bank deposits, overdrafts, personal loans etc

Capital marketsCapital markets consists of Stock, both equity

and bondse.g Company conducts an IPO or GRZ issues a

bond

Companies and governments sell securities in the primary market.

Investors trade these securities on exchanges and over the counter, it's called the secondary market.

Capital markets cont’d

Who is the LuSE?The Lusaka Stock Exchange is a modern,

young exchange that acts as a platform for securities or financial instruments to be traded on the secondary market.

Founded in 1992 with the collaborative efforts of the International Financial Corporation and the World Bank.

Opened doors in February, 1994. The year 2014 marks the LuSE’s 20th Anniversary year

What is the LuSE ALT-M?The LuSE Alternative Market definition:

“LuSE Alt-M is a market for small to medium companies that are in a growth phase and applicants that meet the criteria for listing on the Main Board will not ordinarily be granted a listing on LuSE Alt-M and the LuSE reserves the right to request such applicants to route their applications to the Main Board”

Definition of an SMESMEs/Emerging

corporates/Small-cap/Growth companies:Small

<50 employeesAnnual turnover K200,000 – 1,000,000

MediumAnnual turnover K1,000,000 – 20,000,000>50 employees

Requirements to List on The LuSE ALt-MMinimum of up to twenty (20) and a maximum of

hundred and fifty (150) employees, a minimum trading turnover of K250, 000 and a maximum trading turnover of K20 million.

Must have a contracted Financial Advisor known as a Designated Advisor or DA

Minimum of 5 board directorsMajority being non-family members Chairman and Chief Executive shall be separated

after 5yrs following the issuer’s listing

Requirements cont’dShow operation at least 5yrs and/orIncreased revenues and market share for 3

successive years and/orSubmit audited financials of the Preceding

financial year end and/or Produce a profit forecast for remainder of fin.

Yr and 1yr after and/orSubmit a business plan for the next 5 yrs of

its operations

Requirements cont’dLuSE Alt-M features reduced listing fees and

requirements in comparison to the main board:

Not less than 500,000 equity shares in issue. The public must hold a minimum of 10% of

each class of equity securities and the number of public shareholders shall be at least 30

Excludes DA held shares

Farmers Accessing the Capital MarketsShares and Bonds• Farmers can buy shares and bonds(corporate

and government) and earn dividends (interim and/or final)

• For bonds the rate of interest is known( usually long term)

• Sell their shares as share prices increase in order to realize a profit

Farmers Accessing the LuSE Alt-MLuSE Alt-M Market Financing

• Farmers can incorporate a co. & offer shares to the public-issuance of prospectus on the LuSE Alternative Market

By listing on the LuSE Alt-M, farmers will attract investor appeal and funding, both retail and institutional

Can issue Rights Offers/ Claw back rights offers to raise further funds, eg. CEC raised approximately USD$70million between February and March 2014 through a rights issue.

The Role of the SEC & the LuSE Alt-MPotential listing companies require to pay an

initial, non-refundable document scrutiny fee of K22,000 in order to have their documentation considered for approval by the SEC.

The Securities and Exchange Commission plays an integral role in ensuring the success of the LuSE Alt-M by ensuring that the listing companies on the LuSE Alt-M adhere to the highest practice of good corporate governance and hence increasing investor appeal and ultimately, funding

Thank you